The USDA delivered a little news for both the bull and the bear yesterday from a domestic perspective; positive corn, negative wheat and beans but if you shift your focus to the world estimate, the numbers all leaned into the positive column. Global wheat ending stocks were reduced right at 2 MMT, coarse grains 3.67 MMT, corn 3.48 MMT and soybeans just shy of .5 MMT. Granted, none of these changes were dramatic but some, i.e., corn, which I believe has yet to reflect the extent of the issues in South America (possibly -7MMT), but regardless they were still all lower and the rule of thumb is that reducing ending stocks will translate into steady to higher price levels.

All that said, as is often typical, (see equity markets beginning last Friday) the strength in grain and soy markets appeared to exhaust after the report was released yesterday and we continue to struggle once again this morning. While part of this could be just a response to a short-term overbought situation, and a second meltdown over in the equities very well could have caused all traders to tread cautiously, but I have to suspect that a little more discouraging news from China may have weighed on markets as well. We are already aware of the fact that this nation has shifted more and more of their bean purchases to South American and late last year began to demand more stringent grading standards for US beans. Early this week there have been accusation about unfair sorghum prices and now in addition to this, it has now been reported that four cargoes of corn purchased from the United States have been canceled due to GMO issues. I suspect many believed that this problem was behind us, which needless to say would be great news for the US corn market as it would appear that China should be ramping up imports as they expand their pork and ethanol industries. While I may be mistaken, is would seem more than a coincidence that these issues have popped up as our nation has become not only more vocal about trade between the countries but has gone to the extent of imposing stiff tariffs on washing machines and solar panels from China. While there is seldom any winner when trade battles are waged but unfortunately, in this one, US ag is set to be the bigger loser.

I cannot sign off this week without making at least a short comment about the equity markets. At the extreme, the S&P 500 has lost just a bit over 12% from the highs, which in and of itself is not extreme but when it all happens within a weeks time span, it does tend to make everyone sit up and pay attention.

I suspect you have read or heard some of the dire predictions that this is the just the beginning of a financial Armageddon and while I do not want to jump into that camp, I do believe it is a solid signal that the 9-year bull market in equities is over for now and in the months ahead, there will be a deeper correction than this. This should be considered nothing more than normal and as I have commented numerous times in past year or so, should herald in a return to greater interest and investment (as well as better prices) in the commodity realm.

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